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Cape Town - The national energy regulator confirmed on
Wednesday that it aims to heed Eskom's call to have South Africans pay cost
reflective electricity prices by 2018.

Nersa's Thembani Bukula said the regulator would receive
Eskom's medium-term tariff application, called MYPD3, by the end of the month,
and then hold consultations for two months before deciding the increase regime
for the next five years.

"We have done our own calculation of what the price
increase needs to be, to be cost-reflective.

"Our own model gives us an
impression but we need certain inputs from industry," he said on the
sidelines of a briefing to parliament's portfolio committee on energy.

The consultation period will end on November 30. Nersa will
then hold public hearings on the tariff increases in January, before announcing
a decision at the end of February 2013, he told the committee.

Eskom's spokesperson Hilary Joffe confirmed that Eskom
received extensive comment on its application from National Treasury and the SA
Local Government Association (Salga) on Tuesday.

Eskom has also been tight-lipped on reports that leaked
documents reveal it is demanding annual increases of between 14.6% and 19%.

Eskom applied for increases of 45% in its MYPD2 submission
for 2009 to 2012, and treasury recommended that this be downscaled to 35%.

Nersa awarded increases of roughly 31% annually but this was
adjusted to 16% in the past two years, after government waived dividends of
some R7.7bn.

Bukula noted that this reprieve to the consumer moved back
the goalposts on achieving tariff reflectivity, hence the new target of 2018.

"Ultimately the goal is inflation-related increases,
but we have to take a detour of becoming cost-reflective to cover the cost of
the plants and to deal with the fact that we have old infrastructure."

He added that in terms of taxpayers footing the bill for
capital expansion, he believed "we are over the hill now and going
downwards".

Responding to a question from opposition MP Lance Greyling,
Bukula said Nersa had leverage in making sure Eskom went about expanding
infrastructure in a cost efficient way.

He confirmed that Nersa was looking into complaints about
problems with the utility's contract with Hitachi to supply boilers for its new
Medupi and Kusile plants, and would fine Eskom if it were at fault.

"On penalties for Hitachi, the jury is still out. All
of these things are going to be out in the open in the regulator's
account."

The regulator would also take into account the re-evaluation
of Eskom's assets, which could differ from the assessment it submitted in its
MYPD2 application.

In May, Eskom's finance director Paul O'Flaherty told MPs
the utility needed tariffs to reach a price level of 90 cents per kilowatt hour
in real terms, in five years, to complete its R385bn build programme and pay
off its debt.

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